Ethics in Accounting:

Trusts and Trustee Duties

Trusts and Trustee Duties 4. A trustee of a split-interest trust has to allocate income to the income beneficiary and principal to the remaindermen. The trustee recently used $20 million of the trust's assets to purchase a zero-coupon bond in a very safe company. The effect tive annual yield on this bond is 8%. Zero-coupon bonds are purchased at a deep discount and provide the full face value to an investor in cash on the matu- rity date of the bond. a. As the accountant for this split-interest trust, would it be important for you to read the trust document? Why? b. Do you have to do any research to perform your task properly? c. How should the annual appreciation in the matu- rity value of this bond be accounted for? d. How much cash income will this bond generate for the income beneficiary in the first year of own- ership? e. Has the trustee breached a fiduciary duty